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Takeaways from the ICAS webinar on The Production and Consumption of Information on Intangibles

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Marie Gardner By Marie Gardner, Head of Research

10 December 2021

Main points:

  • ICAS, EFRAG and EFFAS hosted a webinar which discussed the results and practical recommendations from a large-scale research project they are jointly supporting on the reporting and consumption of intangibles.
  • The event was also the conduit for a panel discussion with the hosts and Alain Deckers from the European Commission.
  • Much remains to be debated on how to report more and better information on intangibles, and the link with sustainability reporting, but this research provides welcome evidence on the preferences of users and preparers.

Marie Gardner highlights key points from the recent ICAS intangibles webinar.

Participants from across Europe attended an ICAS webinar on intangibles, held in partnership with the University of Ferrara, the European Financial Reporting Advisory Group (EFRAG) and the European Federation of Financial Analysts Societies (EFFAS).

This event consisted of a presentation of the results and practical recommendations from the first large-scale empirical research on the views of users and preparers on the reporting of intangibles, which served as input to reactions and a panel discussion with Bruce Pritchard CA, ICAS President, Chiara Del Prete, Technical Expert Group Chair at EFRAG and Jean-Philippe Desmartin, Co-Chair of the EFFAS Commission on Environmental, Social and Governance issues.

We were delighted to also be joined by Alain Deckers, Head of Unit at the European Commission DG FISMA, as a panelist to share his views on this ICAS-funded research and on the issue of the reporting of Intangibles more generally.

Intangibles matter

Unsurprisingly as the global economy has moved from manufacturing to service-based, all panelists agreed that intangibles and information thereon matter. To quote Alain Deckers: ‘Intangibles are a very important part of the contemporary economy and represent a growing part of investment by the business sector, even if not all of that investment is always captured in national accounts because of the well-known problems that exist with the measuring of intangibles.’

We were also reminded that over 85% of the value of the investment market currently comes from intangibles.

Although intangibles are critical indicators of the performance and future value of a business, concerns have been voiced that financial statements are losing their relevance as they do not reflect many of these intangible elements. IAS 38 ‘Intangible Assets’ is one of the sticking points as it requires all internally generated intangibles to not be recognised on the face of the balance sheet (with the exception of development expenses when certain requirements are met), and therefore for only acquired intangibles to be recorded at cost or fair value.

A simple solution?

As is invariably the case, and even more so with intangibles, there is no ‘silver bullet’ or a simple one-size-fits-all solution to address the issue of intangibles reporting, and this despite a key finding from the research that both users and preparers believe that intangibles currently outside financial statements should be subject to standardisation and/or mandatory guidance.

The fact is that intangibles do not, and far from it, form a homogenous group, and neither do the businesses that rely on them for value creation.

As far as measurement is concerned, some intangibles will be more likely to meet the definition of an asset, a price or a sufficiently precise cost for which can be attributed for recognition in financial statements.  That is far from the case for all intangibles however; for example, where a liquid market does not exist or where the intangible will never meet the definition of an asset and cannot be valued and monetised in any precise manner.

Reporting will therefore need to be adaptable to different categories of intangibles, while still ensuring sufficient consistency and allowing for adequate comparability. A combination of reporting requirements is therefore likely to emerge, between key performance indicators, narrative disclosures and financial information.

Next steps

Evidently, continuing focus and attention are required to determine how and where to provide more and better information on intangibles, as well as making the link between sustainability and intangibles reporting.

Thankfully, the accounting community is effervescent with both current and forthcoming activity on the topic, not least from EFRAG and their discussion paper on which commentary is welcome until 30 June 2022, the Council and Parliament of Europe as they continue to debate responses to the Corporate Sustainability Reporting Directive (CSRD) proposal, and from the International Accounting Standards Board (IASB) and recently announced International Sustainability Standards Board (ISSB).

In this context, the empirical evidence provided by today’s research was recognised as policy-relevant and a welcome contribution to the debate.


Find out more by watching the recording.  You can also submit questions and comments on this topic to research@icas.com.

30 November: The production and consumption of information on intangibles

A discussion of the results and practical recommendations from a research project on the reporting of Intangibles.

The production and consumption of information on intangibles: an analysis of some preliminary results

By Prof. Stefano Zambon (PhD, London), Prof. Giuseppe Marzo, Prof. Stefano Bonnini, Dr Laura Girella, and Dr Arianna Pittarello University of Ferrara (Italy)

7 July 2021

2022-11-mitigo 2022-11-mitigo
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